MEP Scholz: EU could have done more for Ecuador

In an exclusive interview with Borderlex, MEP Helmut Scholz explains why he thinks Ecuador’s accession to a free trade deal with Peru and Colombia needs to be supported, and why the EU needs to do more to promote labour, human rights and environment in the multilateral trading system.

On Friday (11 November 2016), Ecuador will join the EU’s free trade agreement with Peru and Colombia, the South American country’s two main neighbours, after a lengthy and tortuous process. Ecuador has found a perhaps surprising supporter in Helmut Scholz, a German MEP from the far left group GUE/NL, who is rapporteur in the Parliament for this file.

“Ecuador’s accession to the FTA is a long story”, Scholz told Borderlex. The FTA with with Peru and Colombia is an offspring of a failed attempt to do a region-to-region deal with the so-called Andean Community that includes these two countries and Ecuador as well as Bolivia. But the latter two countries, whose domestic and economic policies took a more populist turn, in contrast to an increasingly market liberal outlook in Colombia and Peru, finally dropped off the talks. Brussels thus proceeded only with Bogota and Lima and concluded a deal in 2012.

Without the help of an EU trade deal, but on the back of high commodity prices, Ecuador, a petroleum and agriculture exporter, has recently seen a remarkable increase in its wealth. According to World Bank data, Ecuador’s gross domestic product increased five-fold in fifteen years: it stood at US $ 18 bn in 2000, to reach US $ 100 bn in 2015. Poverty was drastically reduced from 64 percent of the population living below the national average poverty level in 2000 to 23 percent in 2015.

This in turn explains why Ecuador lost its preferential market access to the EU under the GSP scheme for developing countries in 2014. Ecuador has been granted a transition period by the EU, which is ending in December this year. Partly due to EU pressure, Ecuador decided that year to join the FTA with its neighbours.

Scholz, who is a staunch critic of the EU’s trade policies and his group generally votes against any EU free trade deal, is endorsing Ecuador’s accession to the pact. “I wanted to take up the interest of Ecuador”, Scholz said.

Despite its economic progress, the country remains poor and has been rattled by the recent drop in commodity prices and an earthquake that hit it this year. It is a dollarized economy so “Ecuador has no room for maneuver in the face of shocks”, Scholz reckons. Colombia and Peru are competitors to Ecuador in global markets for flowers, fish and shrimps, or bananas. With their privileged access to the EU market via the FTA, Ecuador is at a disadvantage, Scholz says.

Rewarding Ecuador

Helmut Scholz also wants to reward Ecuador for accepting the EU’s demands made on it on the area of human rights, labour and social rights, and the environment, not least under pressure from Scholz’s political group. “We have been presented by Ecuador a full description of what it has done and is planning to do in this area”, Scholz said. “They are doing more than what was required in the [EU-sponsored] roadmaps in these areas for Colombia and Peru” drawn up in parallel to their free trade pacts with Europe, Scholz reckons.

The German MEP also believes that the long transition periods granted to Ecuador to phase out import tariffs gives the country enough leeway to adapt and “modernise its economy and its social system and build its services sector”.

“The EU could have done more for Ecuador” in return for its efforts, Scholz believes. The EU could have given Ecuador more market access in products with higher value added. The current deal does not do enough to help Ecuador out of an economic model centered on the exports of commodities and raw materials, Scholz deplores.

Also “the member states were too slow” in accepting Ecuador into the deal. In the EU the perspective of having more bananas from Ecuador was raising heckles in some corners of Spain and France, and Colombia and Peru had their issues with Ecuador too.

Scholz believes Ecuador’s deal with the EU on the sustainable development front – labour, human rights, environment – should be replicated at the regional and multilateral or WTO level. “Market access is only one thing. We need to ask more about the repercussions of old models that rely exclusively on exports of raw materials”.